IFA Quote for Drawdown

HarryD

Linton wrote: »

I dont think the optimal investment strategy for a pot of £300K is one index tracker (does it matter which one?). Actually I dont think one index tracker is sensible for any pot from which you are hoping to get a steady income. The more money you have the more it makes sense to invest in niche products focused on achieving your specific objectives.

I agree and was not suggesting the OP should put everything into one fund. I was simply illustrating the low level of fees one can achieve.

In fact I have a mix of ultra-low-charge UK All Share tracker, the Aberdeen emerging market fund and a couple of broadly based investment trusts which have worldwide investment flexibility on the basis that the guys at F&C and JP Morgan know an awful lot more about the best places to invest than I do.

dunstonh

I agree and was not suggesting the OP should put everything into one fund. I was simply illustrating the low level of fees one can achieve.

But not on a like for like basis. We know an IFA can get cheaper than HL and fund fees would be the same. The only difference of note, is one comes with an adviser charge and one doesnt. Both options will have platform/provider charges and fund charges.

In fact I have a mix of ultra-low-charge UK All Share tracker, the Aberdeen emerging market fund and a couple of broadly based investment trusts which have worldwide investment flexibility on the basis that the guys at F&C and JP Morgan know an awful lot more about the best places to invest than I do.

That would pretty much look like a mis-sale on an advised case. The ombudsman would look at investment strategy, investment knowledge and experience, risk profile and capacity for loss. There appears to be no strategy there and is invested way above the average UK consumer risk profile. That may be fine for you but is certainly isnt an asset allocation that is typical for a drawdown case.

of course, when you DIY, you are free to make your own mistakes as you only have yourself to blame. An adviser doesnt have that luxury. That is in part what you are paying for as the adviser will have liability for advice for life.

HarryD

dunstonh wrote: »

That may be fine for you but is certainly isnt an asset allocation that is typical for a drawdown case.

I wasn't suggesting that particular mix would be right for the OP or anyone else, I was responding to the point made above that one should not have everything in one fund.

The OP states he is not averse to going DIY. If so, by shopping around and finding the best platform (which may not necessarily be the very cheapest), and by perhaps taking advice on the most appropriate things in which to invest, I cannot help feeling he can pay a lot less than 2.75%pa in charges and fees.

I have a friend who pays an annual fee to an advisor. Every few years, when his fund has failed to outperform, he changes advisor, incurs cost as a result of being advised to switch into different investments - and still his fund does not outperform.

dunstonh

I cannot help feeling he can pay a lot less than 2.75%pa in charges and fees.

However, only 0.75% of that is cost of advice. As already mentioned, that is too high.

I have a friend who pays an annual fee to an advisor. Every few years, when his fund has failed to outperform, he changes advisor, incurs cost as a result of being advised to switch into different investments - and still his fund does not outperform.

Your friend doesnt appear to know what an adviser does. An adviser is not there to provide outperformance. The adviser is there to ensure suitability. The adviser has no direct control over investment returns. Performance will be whatever performance will be.

I had to remind someone recently that wasnt impressed with their growth and thought they should have had more. However, they were comparing the FTSE (100% equity) to a cautious (almost defensive) portfolio as they had said time and again they only had a small tolerance to loss and that is how the portfolio was built. I bet if they went DIY they would go 100% FTSE tracker as I know they dont have the knowledge and understanding and they would sing and dance about how much better and cheaper it is than their adviser arranged. That is until the next market crash comes along. They would change their tune then.

There are people who can DIY and DIY well. There are people who DIY and make a pigs ear of it.

HarryD

dunstonh wrote: »

I bet if they went DIY they would go 100% FTSE tracker as I know they dont have the knowledge and understanding and they would sing and dance about how much better and cheaper it is than their adviser arranged. That is until the next market crash comes along. They would change their tune then.

They may well change their tune, then change it again when the market recovers.

dunstonh wrote: »

There are people who can DIY and DIY well. There are people who DIY and make a pigs ear of it.

There are IFAs who advise well, there are IFAs who make a pig's ear of it. Or perhaps not?

dunstonh

They may well change their tune, then change it again when the market recovers.

Assuming they are still in the market and havent moved out of it again in panic. Just as your friend was doing.

There are IFAs who advise well, there are IFAs who make a pig's ear of it. Or perhaps not?

And that is where consumer protection exists for the tiny number of cases where an IFA does mess up. (IFA complaints running at under 1% of complaints at the FOS. most of which get rejected).

TheTracker

dunstonh wrote: »

That is in part what you are paying for as the adviser will have liability for advice for life.

Wouldn't most IFAs hold PII, and many would also work though a company for limited liability, insuring against it? Interested to know. I thought it was only self-employed IFAs that would be likely to hold the liability you describe.

The Association of IFAs has long lobbied to limit the liability in law through time limited caps on liability with shorter timeframes for riskier portfolios, and customer signed off liability. Of course AIFA says this is in the consumers best interest. I think it only a matter of time before the lobbying pays off.

zagfles

dunstonh wrote: »

HL are not cheap.

They are much cheaper than the OP is being quoted. Also with that size fund he/she'd be able to negotiate a discount, likely 0.2-0.25% platform charge.

https://forums.moneysavingexpert.com/discussion/4889890

You also pay drawdown charges and HL have exit charges and a menu of other charges (more than most platforms).

Really? HL's drawdown charges are cheaper than most platforms when I last looked into it.

https://forums.moneysavingexpert.com/discussion/4922919

Has this changed? Do you have a more up to date analysis?

OP see also this thread for some more useful links inc to Snowman's spreadsheet for platform charges.

https://forums.moneysavingexpert.com/discussion/5019980

If the OP went ahead, you would probably find the chosen platform is cheaper than HL, fund charges the same as HL (as is normal in the unbundled world) and then you have the adviser charge on top which is paying for the advice.

HL have discounts on quite a lot of funds or cheaper classes which aren't available on other platforms.

atush

HarryD wrote: »

They may well change their tune, then change it again when the market recovers.



There are IFAs who advise well, there are IFAs who make a pig's ear of it. Or perhaps not?

I don't think so. Too many inexperienced investors sell in market crash out of fear so miss any recovery.

IFas who make a pigs ear of it, won't stay in business long.

dunstonh

Wouldn't most IFAs hold PII, and many would also work though a company for limited liability, insuring against it?

Whilst some may be limited companies (and the trend it that way), most have been sole traders or partnerships. With no long stop on financial services, these IFAs will still be paying PI insurance in their 90s.

The Association of IFAs has long lobbied to limit the liability in law through time limited caps on liability with shorter timeframes for riskier portfolios, and customer signed off liability. Of course AIFA says this is in the consumers best interest. I think it only a matter of time before the lobbying pays off.

Most industries have some for of long stop and advisers are nearly unique in having none. It should come but I dont think it will be any time soon.